Novel therapeutic approaches to treat bone diseases remain a critical medical issue. Diseases such as osteoporosis, osteogenesis imperfecta and craniosynostosis, as well as traumatic bone injury have been treated utilizing cell-based approaches using adult mesenchymal or endothelial progenitor cells. However, results of these studies have been inconclusive, and currently no cell-based treatment utilizing adult progenitor cells has yet translated into routine clinical practice for bone repair. As an important and novel approach, this proposal will test the use of human embryonic stem cells (hESCs) to create an innovative model of bone development and repair. Additionally, these studies of hESC differentiation into osteogenic cells will shed new insights into basic cellular and genetic mechanisms that regulate human osteoblast differentiation. In turn, these studies will provide additional approaches to treat genetic and acquired disorders of bone formation, such as osteogenesis imperfecta and osteoporosis. Previous studies by our group demonstrate hESCs can be routinely supported to differentiate into multiple cellular lineages including hematopoietic and other mesodermal progenitor cells. Here we will test the central hypothesis that hESC-derived CD34+ cells serve as mesoderm progenitor cells with osteogenic potential. Testing this hypothesis will be advanced by developing hESC lines engineered to express fluorescent reporter molecules driven by the RUNX2 promoter to facilitate the identification of key signaling and developmental pathways that mediate the development of osteogenic cells. These cells will also enable subsequent analysis of agents that may be utilized to promote bone formation, as well as the testing of hESC- derived MSCs and more differentiated osteo-progenitor cells in a fracture repair model. This proposal will show that hESCs can efficiently differentiate into osteogenic cells in vitro and in vivo and that they can represent a novel resource for studies of bone repair and development. Public Health Relevance: It is estimated that more than 10 million Americans have osteoporosis, and that 5-10% of all fractures are complicated by delayed union or nonunion, thus indicating that diseases of bone formation represent a serious medical issue. While a variety of cell-based therapies have been tested for bone disorders, there are inherent limitations to the types of cells (principally adult mesenchymal or endothelial progenitor cells) that have been used in the existing experimental models. The derivation and characterization of human embryonic stem cells (hESCs) provides a unique and potentially highly significant advance in understanding the mechanisms pertaining to bone regeneration and the management of these conditions.